Borouge

1. Company Overview & Earnings Context

Borouge Plc reported a challenging 9M 2026 earnings period, with operational disruption and significantly higher feedstock and logistics costs outweighing the benefit of stronger selling prices and product premia. Revenue declined moderately, but profitability contracted much more sharply as production and sales volumes fell and unit costs increased. 

The third quarter showed a meaningful operational recovery from Q2, however. Q3 production increased 32% QoQ to 949 kt and sales volumes increased 22% to 1,069 kt as ethane feedstock availability improved. Despite that recovery, Q3 earnings remained substantially below the prior year because realised prices moderated from Q2's exceptional levels and logistics and propylene feedstock costs remained elevated. 

The accompanying financial-statements PDF is image-based and its financial text could not be reliably extracted. Accordingly, the detailed figures below are based on Borouge's Q3 2026 Management Discussion & Analysis, rather than filling any gaps from the unreadable financial-statements document. 

2. Financial Performance Snapshot

9M 2026 vs. 9M 2025

• Revenue: US$4.025 billion vs. US$4.172 billion (-4% YoY)

• Total Costs: US$2.649 billion vs. US$2.552 billion (+4%)

• Gross Profit: US$1.377 billion vs. US$1.620 billion (-15%)

• Operating Profit: US$710 million vs. US$1.183 billion (-40%)

• Adjusted EBITDA: US$1.023 billion vs. US$1.571 billion (-35%)

• Adjusted EBITDA Margin: 25% vs. 38%

• Net Profit: US$455 million vs. US$769 million (-41%)

• Net Profit Margin: 12% vs. 18%

• Basic EPS: US$0.02 vs. US$0.03

• Adjusted Operating Free Cash Flow: US$825 million vs. US$1.361 billion (-39%)

• Cash Conversion: 81% vs. 87%

• Net Debt: US$3.346 billion, +15% YoY

 Q3 2026

Q3 revenue was broadly flat YoY at US$1.444 billion, but adjusted EBITDA fell 51% to US$279 million and net profit fell 63% to US$109 million. EBITDA margin compressed dramatically to 19% from 39% a year earlier. Against Q2 2026, however, revenue increased 3% as the recovery in sales volumes partly offset the 19% decline in blended selling prices. 

Underlying-performance note: The relatively modest 4% decline in 9M revenue understates the operational pressure. Sales volumes fell 19%, but this was substantially offset by a 19% increase in average selling prices. The more important earnings issue was the cost base: adjusted EBITDA fell 35% and its margin contracted by approximately 13 percentage points to 25%. 

3. Operating Performance & Major Programs

Borouge's major operational issue in 2026 has been reduced production resulting from feedstock constraints. Total 9M production fell 20% YoY to 2,878 kt, with PE production down 22% to 1,551 kt and PP production down 16% to 1,327 kt. Nine-month utilisation stood at 75% for PE and 80% for PP, versus 97% and 95%, respectively, in 9M 2025.  

The encouraging development was the Q3 recovery. Production increased 32% QoQ to 949 kt, as utilisation improved to 76% from 58% in Q2. PE utilisation recovered particularly strongly to 80% from 48%, reflecting improved ethane feedstock availability. 

Borouge 4

Borouge continued progressing its major Borouge 4 expansion, which is expected to add approximately 1.4 million tonnes of production capacity when fully ramped up.

During Q3:

• The PE7 plant reached mechanical completion and commissioning, adding 700 ktpa of polyethylene capacity.

• The new XLPE 2 plant recorded approximately 20 kt of sales during the quarter.

• XLPE 2 adds 100 ktpa of capacity and doubles Borouge's XLPE production capability.

• Further Borouge 4 plants are expected to come online through Q4 2026 and 2027.

The project is strategically important because it provides the next major source of volume growth once the current feedstock and logistics constraints normalise.

Borouge also demonstrated supply-chain flexibility. Q3 sales exceeded Ruwais production by 120 kt, consisting of 66 kt of non-Ruwais sales and a 54 kt inventory drawdown, supported by continued use of alternative logistics routes. 

4. Key Performance Drivers

The first major driver was lower production and sales volumes. Nine-month sales volumes declined 19% to 3,028 kt, including a 25% reduction in PE volumes and an 11% reduction in PP. 

This was substantially offset at the revenue level by pricing. Blended 9M average selling prices increased 19% to US$1,243/t, with PE pricing up 20% to US1,283/tandPPup18%toUS1,198/t. 

Borouge also continued generating attractive product premia. Nine-month average PE premia were US$301/t, while PP premia were US176/t,bothabovemanagement'sthrough-the-cycletargetsofapproximatelyUS200/t and US$140/t, respectively. This reflects the company's emphasis on differentiated, higher-value products. 

The main profitability pressure came from cost inflation:

• 9M cost of sales excluding D&A increased 8% despite lower production/sales volumes.

• Feedstock costs increased 24% to US$1.125 billion.

• Feedstock cost per tonne rose to US372/tfromUS243/t.

• Total cost of sales per tonne increased to US778/tfromUS580/t.

• Selling and distribution expenses surged 88% to US$566 million.

• Selling and distribution cost per tonne increased to US187/tfromUS80/t.

This cost escalation explains why a 4% revenue decline translated into a 35% EBITDA decline and 41% net-profit decline.

Q3 remained especially difficult, with selling and distribution expenses doubling YoY to US$220 million, reflecting sustained elevated logistics costs. However, logistics expense per tonne improved QoQ to US206/tfromUS254/t, indicating some sequential normalisation. 

5. Balance Sheet, Backlog & Cash Flow

Based on the management disclosure:

• Net Debt: US$3.346 billion at September 2026 vs. US$2.915 billion at September 2025 (+15%)

• Q3 Adjusted EBITDA: US$279 million

• 9M Adjusted EBITDA: US$1.023 billion

• 9M Capital Expenditure: US$198 million vs. US$210 million

• 9M Adjusted Operating Free Cash Flow: US$825 million vs. US$1.361 billion

• Cash Conversion: 81%

• Q3 Adjusted Operating Free Cash Flow: US$244 million

• Q3 Cash Conversion: 88%

Despite the substantial decline in earnings, Borouge continued to demonstrate relatively strong cash conversion. Adjusted operating free cash flow of US$825 million represented 81% of adjusted EBITDA, although absolute cash generation was 39% below the prior-year period. 

Net debt increased by approximately US431millionYoYtoUS3.35 billion, which becomes more important given the decline in EBITDA and therefore weaker debt-service capacity relative to earnings.

Borouge does not report a conventional contractual backlog/order book comparable with an EPC or construction company. Instead, the principal forward growth pipeline is Borouge 4, with approximately 1.4 million tonnes of additional production capacity expected once fully ramped up. Further units are scheduled to be commissioned and brought online through Q4 2026 and 2027, subject to feedstock availability. 

This production-capacity pipeline is therefore more relevant to future earnings visibility than a conventional backlog.

6. Investor Takeaway

Borouge's 9M 2026 results show a clear divergence between revenue resilience and earnings pressure. Revenue declined only 4%, helped by 19% higher average selling prices and strong product premia, but lower volumes combined with sharply higher feedstock and logistics costs drove adjusted EBITDA down 35% and net profit down 41%.

The encouraging element is that the operational trough appears to have been concentrated earlier in the year. Q3 production recovered 32% QoQ, sales volumes rose 22%, and PE utilisation improved from 48% to 80%. Management subsequently reported that overall utilisation reached approximately 90% in October 2026, indicating further recovery entering Q4. 

The near-term outlook is therefore stronger than the reported 9M numbers suggest. Management expects Q4 2026 adjusted EBITDA to be significantly higher than Q3, supported by higher production volumes and improved pricing. Q4 polyolefin benchmark prices had already moved above Q3 levels, while further incremental improvements in logistics costs per tonne are expected. 

Borouge 4 is the major medium-term catalyst. The project adds approximately 1.4 Mt of capacity, with PE7 alone contributing 700 ktpa and XLPE 2 adding 100 ktpa. Successful ramp-up through Q4 2026 and 2027 could materially improve volumes and operating leverage, although feedstock availability remains a critical dependency. 

Key investor risks to monitor are feedstock availability and pricing, utilisation rates, logistics costs, benchmark PE/PP pricing, sustainability of product premia, Borouge 4 ramp-up, and the increase in net debt. The sharp margin compression—from 38% to 25% adjusted EBITDA margin in 9M—shows that earnings remain highly sensitive to the interaction between utilisation, product pricing and input/logistics costs.

At the same time, shareholder returns remain a central part of the investment case. Management intends to pay FY 2026 dividends of 16.2 fils per share and reiterates its commitment to a minimum annual dividend of 16.2 fils per share until at least 2030. 

Overall, 9M 2026 was a weak earnings period but Q3 showed meaningful operational recovery. The investment case now depends less on the backward-looking 9M profit decline and more on whether higher utilisation, improving logistics economics, better Q4 pricing and the Borouge 4 ramp-up can restore EBITDA margins and cash generation while keeping leverage under control.